May 7—Hospitals provided $44.6 billion, or 59.5 percent, of the $74.0 billion in uncompensated care delivered in 2013, according to an Urban Institute study released this week.

The balance of uncompensated care came from publicly supported community providers (26.4 percent) and office-based physicians (14 percent).

The study estimated that government payments for uncompensated care totaled $52.6 billion, or up to 70 percent of the costs that year, while in-kind contributions by physicians totaled $10.5 billion. An undetermined amount was covered by philanthropy, and “Most of the rest of the uncompensated care was presumably paid for by private insurance,” according to the study.

Total Medicaid payments for uncompensated care in 2013 were $13.5 billion and total Medicare disproportionate share (DSH) and indirect medical education (IME) payments were $8 billion. The researchers inflated reported 2011state and local government public assistance programs to conclude $7.3 billion was allocated to uncompensated care in 2013.

A second, more likely estimate produced by the researchers concluded uncompensated care costs totaled $84.9 billion. That would leave $52.6 billion covered by government payments, $10.5 billion in physicians’ in-kind contributions, and an estimated $21.8 billion financed by private insurance.

Although the researchers acknowledged that their estimates could undercount the amount of uncompensated care covered by private insurance, they also noted that $21.8 billion was “only” 2.4 percent of private insurance expenditures in 2013.

The researchers acknowledged that the ability or interest of hospitals shifting uncompensated care costs to private insurers “vary widely.”

“For example, it could be the case that in some highly competitive markets, a hospital would absorb uncompensated care costs as a loss and implement cost-cutting measures in response, whereas in other markets, a health plan would pay for the care, ultimately passing its costs on to subscribers through higher premiums,” the study’s authors wrote.

The study noted, however, that teaching hospitals, which have substantial market power and the ability to negotiate higher payments from insurers in response to increases in uncompensated care costs, “do not seem to exercise this power in a major way.”

Assistance Cut Concerns

The study underscored the increasing hospital concerns over looming Medicare and Medicaid DSH cuts, which the Affordable Care Act (ACA) is scheduled to reduce by 2019 by 28 percent and 50 percent, respectively. The ACA cuts were based on an expected reduction in uncompensated care costs, but the extent of that could be limited by the decision by half the states to not expand Medicaid eligibility, as encouraged by the ACA.

Hospital advocates also have raised concerns that the recent botched ACA marketplace rollout could leave fewer than projected covered—although the Obama administration has claimed 8 million enrollments—far more than initially projected.

If uncompensated care costs do not fall, the authors wrote, hospitals could respond to planned DSH cuts “by reducing the level of uncompensated care they provide or adopting more aggressive billing practices for the uninsured.”

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter @rdalyhealthcare.

Publication Date: Wednesday, May 07, 2014